Mexico: The Role Of The ASEA Within The Development Of The E&P Unconventional Sector

In accordance with the 2013 Energy Reform, regulatory bodies
were restructured or given new attributions with the purpose of
implementing the Reform within all energy related activities. It
also aimed to coordinate those bodies to enable consistency in
terms of energy regulation. Such is the case regarding upstream
activities, for instance E&P offshore operations that are
developed both on shallow or deep waters and onshore ones developed
on conventional and unconventional fields. As mentioned before, 2
regulatory bodies that existed before the Reform were significantly
modified according to the new legislation, them being the Energy
Regulatory Commission ("CRE" for its acronym in Spanish)
and the National Hydrocarbons Commission ("CNH"
for its acronym in Spanish). Another pre-existing regulator greatly
modified by this Reform is the National Agency of Industrial Safety
and Protection of the Environment of the Hydrocarbons Sector
(ASEA for its acronym in Spanish), for which the
Environment Ministry as the ASEA parent entity, has also published
accordingly its own new regulation consisting of the ASEA
law1 along with diverse guidelines and Mexican Official
Norms.

The ASEA within its jurisdiction has adopted a few core values,
contained in the ASEA Law to ensure the physical integrity of the
persons in matters of operative and industrial safety as well as
the integrity of the facilities and the protection of the
environment. The scope of it has covered from the design stages up
until the well abandonment and site restoration. It has also
focused to ensure that the best available industry practices are
being employed.

The ASEA through its new regulation establishes a management
system for industrial safety, operational safety and protection of
the environment ("SASISOPA" for its acronym in
Spanish), which is a risk management, prevention and remediation
system. All regulated entities within the sector shall comply with
the regulation in order to mitigate potential risks that could be
posed on people, facilities and/or the environment. The
aforementioned system is regulated through the ASEA, for this
purpose the SASISOPA guidelines2 were issued, being
mandatory for all infrastructure operators within the energy
sector.

For the Energy Reform to be successfully implemented, the
regulatory bodies need to coordinate between them since some of
their attributions are concurrent and its articulate coordination
is crucial to be in line with a broader government strategy that
aims to coordinate all entities and bodies to simplify and
facilitate the permit granting, the development of regulated
activities and to allow the adequate supervision of the relevant
procedures. An example of the increased effort towards coordination
is the "Ventanilla Única" online
platform, which concentrates various government procedures into one
single system. This feature avoids double registries and
allows the various involved State bodies to share information
regarding the permit holders, with the aim to modernize, simplify
and allow efficiency in the administrative system. That level of
coordination is also sought on regulatory strategies and on the
supervision of the permit holders, not just on the permit request
process but also i.e. instance regarding industrial safety and
environmental protection within the energetic sector. It is
noteworthy to mention that although the ASEA is the principal
supervisor for its regulation, directives and guidelines, it
coordinates mainly with the CRE, the CNH and the water authorities,
as well as having a clear line for its Authorized Verifiers to
follow or comply with.

The recently published Guidelines by ASEA regarding
onshore E&P operations on
conventional3and
unconventional4fields are
complementary to the SASISOPA and expand the scope of the
regulation on this particular subject. It is noteworthy to mention
that it includes the option to submit equal or better standards,
subject to ASEA's, approval than those already established on
the ASEA guidelines or Mexican Official Norms. Regarding this
particular point, the CNH and the National Water Commission
("CONAGUA" for its acronym in Spanish) are
working coordinately with ASEA regarding application
procedures.

It is interesting to highlight some key objectives of the
above-referred Guidelines:

The prevention of water pollution in
the surface or groundwater zone from the drilled hydrocarbons or
the fracturing liquid. It establishes not only minimum distance
from the wells to the water bodies but also address maintenance
(preservation) protocols to ensure the proper containment of the
hydrocarbons and fracturing liquids.

The Guidelines also set norms and standards to handle chemical
additives. An issue worth mentioning is that it is compulsory for
the regulated entities to make public the list of additives,
including chemical composition and quantities used in the
fracturing liquid.

The prevention of soil contamination
by leaks of any kind also has some noticeable obligations, such as
the ban to build dams or pits to store returned fluids. Instead, it
is required to store the liquids in closed containers to ensure
their proper containment. The operator must build physical barriers
to contain and prevent possible leaks.

Another objective is sought to avoid
the release of polluting gases into the atmosphere. This is
achieved through the implementation of procedures contained within
the CNH provisions published on January 7th, 2016, which are aimed
to avoid gas leaks, and by installing equipment to detect any gas
leaks, in case they occur. It restricts the gas venting and flaring
to strictly emergency situations or for system testing; in the
latter case venting limits have to comply with the CNH programs.
The CNH aims to achieve a measurement of resource conservation,
meanwhile the ASEA focus is on pollution and safety matters.

Another sought objective is to
prevent the risk of induced earthquakes by controlling the fluid
injection. The regulated shall register the volumes of the fluids
being injected and it aims to ensure the integrity of the wells. It
establishes a ban against drilling on deep fault sites in order to
mitigate the induced earthquake risk.

These Guidelines seek to achieve that
the regulated activities cause the less possible damage to the
environment in accordance with the SASISOPA Guidelines, through the
implementation of effective risk assessment measures, while
preventing deforestation and habitat fragmentation.

This new regulation, comes along with additional requirements
and regulatory challenges compared to other oil producing
countries. However, in accordance with ASEA´s criteria, it
also increases safety and minimizes risks to drilling personnel as
well as the population established on surrounding areas of the
operation site, the facilities and the environment. As mentioned
before the ASEA uses as regulatory base the best international oil
industry practices. Particularly focusing on known risks: those
with a higher probability of occurrence as well as those that would
cause a greater damage to the people, environment and the
facilities. Another important approach contained in this guidelines
is the certification of certain activities and facilities through
the ASEA or through an Authorized Verifier, these Authorized
Verifiers will aid the ASEA implementing the supervision and
vigilance regarding the compliance of ASEA´s regulation.
Although Mexican regulation regarding E&P activities may be
perceived as being stricter, in terms of regulatory standards and
practices than that of other countries, i.e. the regulation of the
EPA5 regarding oil and gas extraction, the current
Mexican regulation is not so restrictive in terms of additional
incurring costs or onerous charges required for its
implementation. The ASEA seeks to ease the implementation of
this regulation through the Authorized Verifiers. They will act in
accordance with the best of their knowledge and within ASEA
guidelines to match or reach the best prevailing practices within
the industry. It is expected that this new regulation will foster
and enable improvements in the subsector of a modern and
responsible Mexican E&P activities, in line with the prevailing
international energy environment.

Footnotes

1. The National Agency for Industrial Safety and of
Environmental Protection of the Hydrocarbons Sector Law (Ley de la
Agencia Nacional de Seguridad Industrial y de Protección al
Medio Ambiente del Sector Hidrocarburos) published on August 11th,
2014 in the Federal Official Gazette of the Federation.

2. The General Administrative Provisions that establish
the Guidelines for the establishment, implementation and
authorization of the Industrial Safety, Operational Safety and
Environmental Protection Systems applicable to the activities of
the Hydrocarbons Sector (Disposiciones administrativas de
carácter general que establecen los Lineamientos para la
conformación, implementación y autorización de
los Sistemas de Administración de Seguridad Industrial,
Seguridad Operativa y Protección al Medio Ambiente
aplicables a las actividades del Sector Hidrocarburos que se
indican) published on May 13th, 2016 in the Federal Official
Gazette.

On August 7, 2014, the Mexican Congress passed legislation implementing the energy reform, which legislation was signed into law by the President on August 11, 2014 and was published in the Official Daily of the Federation on such date.

By means of Decree No. 104, published in the Official Gazette on May 25, 2017, the Ministry of Mining passed the Regulations on the Delivery of General Information Obtained from Basic Geological Exploration Works (the "Regulations"), which contain the definitions, terms, conditions and proceedings to comply with the obligation to deliver to the National Service of Geology and Mining ("Sernageomin") general information regarding to basic geological exploration works.

The Mexican Energy Sector history, has recently been imprinted by remarkable events. The Congress approval of the Energy Reform on December 2013 is one of the most noticeable in decades.

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